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Investing 101: how to start investing

Investing basics

So you want to start investing. The problem is, you have no idea where to start. That’s okay! We’re here to help with this handy guide.

People hanging from a fairground ride.

Why invest in the first place?

In the long term, higher risks tend to come with the potential for higher returns. Of course, since they come with more risk, they also come with a higher chance of losing some, or all of your investment. People take higher risks because they want the higher potential returns—and don’t mind taking on more risk to have a shot at them. 

Putting money in the bank is pretty low-risk, but the trade-off for that lower risk is lower returns than you may get investing in higher-risk products. Investing in shares may pay a higher return than putting money in the bank, but there is also a higher likelihood that your shares will lose some or all of their value. This is called the risk-return tradeoff.

Sticking your money in a savings account may be a good approach if you want to reduce your risk, and get paid steady, but relatively low, interest rates.

This might be a good approach if you’re intending on using the money soon—like if you’re saving up to buy a car, laptop, or some other expensive item. But if you’re investing for the long term, you might have an appetite for more risk, which means you may be able to earn higher returns than you would have received from your savings account’s interest. 

But remember, this chance at potential higher returns comes with a higher chance of getting no returns, or losing your money.  

Step #1: learn what’s out there

There are two main ways to invest through Sharesies. You can buy shares in specific companies, or you can invest in exchange-traded funds (ETFs). ETFs usually invest your money in a ‘basket’ of other stuff, like shares in companies, bonds, property, or even just savings accounts!

Investing in funds helps you diversify by spreading your money across lots of different things, while investing in companies gives you exposure to specific companies. You can spread your investments across as many companies and funds as you like!

Step #2: make sure you’re comfortable

While it’s true that you might get higher returns by taking on more risk, you need to also invest in a way that you’re comfortable with. If you’re not comfortable taking risks, you might be more likely to panic and sell if your investment drops in value. This could leave you worse off than before!

All investing involves some form of risk, so it’s important to understand what risk is and how you might manage it.

Step #3: choose the investments that are right for you

Take a look at Sharesies and find some things that match your appetite for risk. If you understand and have a higher appetite for risk, you might decide to go with something more volatile, or higher risk. If you’re more cautious, you might choose to invest in something lower-risk.

And remember that each investment is just a part of your overall portfolio so be sure to think about what that bigger picture looks like as you add parts to it. Once you make this investment, what’s the big picture going to look like? Is it going to change? If so, are you comfortable with how things look after this investment?

It’s all about what you’re comfortable with. You should be generally comfortable with your portfolio's overall risk profile. Be sure to check in on a regular basis, because your comfort level and risk appetite may change at any point (more on that later). 

Step #4: choose an amount and get going

Okay, now that you’ve figured out the basics of investing, and what you want to invest in, it’s time to get started! One option is to choose an amount per week, fortnight, or whatever works for you, and transfer that into your Sharesies Wallet on a regular basis.

Choose an affordable amount that’s right for you—high enough to make a difference, but low enough that you don’t constantly raid your Sharesies account when you want to go out for coffee, beers, or anything else that would be tempting enough for you to hit the withdraw button! Could be $20, could be $500—it’s up to you.

Step #5: reassess every now and then

It’s tempting to set and forget, but you don’t want to completely forget. As you get more comfortable with investing, your tolerance for risk may increase (or decrease!). Your income may change, or you may decide to change your spending habits. All these things flow into the amount you invest and what you invest in. So set a reminder to check up every few months. Make sure you’re happy with your investments and make changes as you need to.

Ok, now for the legal bit

Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.

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